As this year's elections approach and a half dozen or so nationally known
Democrats begin to seriously contemplate 2004 presidential bids, political
disagreements muted by the war on terrorism are once again finding their
voice.

The most common Democratic refrain on the stump or the Sunday morning
talk shows is that Republicans are throwing the budget out of balance
and endangering needed federal programs in order to provide tax breaks
to rich people who do not need them. Those making this claim usually insist
that they are not against tax cuts per se. They would simply offer smaller,
more responsible "targeted" tax cuts to people who truly deserve
them.

Ever since Democrats on the House Ways and Means Committee released Congressional
Budget Office figures at the end of the 1980s that purported to show how
the Reagan administration's tax policies disproportionately benefited
the wealthy, such figures have been brandished against every medium-sized
to large Republican tax-cut proposal. George W. Bush may have dismissed
Al Gore's assertions that 40 percent of his tax cut would benefit the
top 1 percent of taxpayers as "fuzzy math," but criticism along
these lines has been persistent.

Yes, these figures are often based on faulty premises at best and downright
wrong at worst. It is also true that the tax cuts touted by Republicans
- including the one passed last year, which was the first to lower marginal
income tax rates since the Reagan years - have gone to those who actually
pay taxes while the "targeted, refundable" tax credits offered
by the Democrats are really welfare payments to people who don't pay income
tax. But any serious Republican tax cut devised on conservative terms
is vulnerable to the "fairness" argument.

Lower marginal income tax rates remove barriers to production and therefore
increase output. But in order to be effective, rates must also far at
the highest levels, cutting taxes for the "rich." It is these
taxpayers who are most responsive to the resultant changes in incentives.
While it has been repeatedly demonstrated that this ultimately pays off
in increased revenues from these same taxpayers, any relief for the rich
is deemed unacceptable.

De Tocqueville warned of the dangers to liberty in a democracy when the
people learn they can vote themselves money from the public treasury.
The present redistributive welfare state has afforded the majority that
very opportunity.

According to IRS data, in 1999 the 9.5 million households with tax returns
on incomes of $100,000 and above - "the rich" in most liberal
polemics - made 62 percent of federal income tax payments, up from 42
percent in 1993. In other words, just 7.5 percent of filers paid more
than three-fifths of all federal income taxes that year. Additionally,
while households earning $100,000 to $200,000 earned only slightly more
than households earning $50,000 to $75,000, they paid 43 percent more
in income taxes.

Out of 129 million taxpayers, 32 million - the top 25 percent of income
earners - pay 83 percent of federal income taxes. This is compared with
the 97 million people who supply only 17 percent of personal income tax
revenues and another 70 million with no pay no income tax whatsoever.
In fact, 43 percent of those who file income tax returns receive credits
in excess of their tax liability. This is why liberals in the name of
"fairness" oppose cutting marginal tax rates and instead offer
refundable tax credits. They wish to seize as much of their opponents'
wealth as possible and bestow it upon their supporters, all the while
expanding those who benefit from government largesse.

Republicans have also helped reduce the number of people subject to the
income tax. The Tax Reform Act of 1986 signed by President Reagan dropped
3 million low-income families from the income tax rolls altogether. The
tax cut signed by President Bush dropped another 4.5 million. While it
is good to free Americans from the income tax, the unintended consequence
has been to create a situation where some of the most economically destructive
tax rates may be left intact while the number of voters who don't pay
income tax - and won't directly benefit from the tax-rate cuts most likely
to stimulate economic growth - increases.

If everyone votes yet progressively fewer people pay the personal income
tax that provided 50 percent of federal revenue in 1999, up from 44 percent
in 1993, larger numbers of people can vote for more government without
worrying about who will pay for it. This helps explain the diminished
political salience of tax cuts. While President Reagan enjoyed somewhat
greater public enthusiasm for a larger tax cut than the one championed
by President Bush, he also faced an electorate that was more burdened
by the income tax across the board - from upper-income taxpayers with
wages taxed at a 50 percent rate and investment income taxed at an eye-popping
70 percent, to working-class families suffering unlegislated, inflation-induced
tax increases even as their real incomes fell.

Tax cuts remain a pivotal issue economically because the taxpayers reeling
in post-Clinton America are owners of small businesses and suppliers of
needed investment capital. But more than ever before, Democrats will be
tempted to wage class warfare against tax cuts because the progressive
income-tax rate structure itself gives them ammunition. While many taxpayers
with little or no income tax liability are still burdened by payroll taxes,
both parties are hesitant to cut these levies because they are used to
finance Social Security and Medicare.

Will taxpayers become a beleaguered minority forced by class warriors
to pay for every public demand for services from the state? Or will this
untenable trend be reversed by tax cuts before there is severe economic
fallout? Only a willingness to cut taxes for the rich will keep property
rights secure and prevent us from killing off potential for economic growth.